Combating Pension Scams A Code of Good Practice - TISA · 2 Combating Pension Scams: A Code of Good Practice March 2015 1. Introduction Pension scams can be damaging to individuals,

Combating Pension ScamsA Code of Good Practice

Combating Pension Scams: A Code of Good Practice. Edition 3. 19 March 2015.

Disclaimer

The Code is for guidance only and does not purport to constitute legal advice. The Code is not exhaustive and nothing in the Code can be relied upon as evidence of compliance with any other legal or regulatory requirement. The Code relates to circumstances prevailing at the date of its publication and may not have been updated to reflect subsequent developments.

Following the Code does not relieve a party of its legal or regulatory obligations and following the Code may not prevent a claim being brought against a party.

March 2015

March 2015 Combating Pension Scams: A Code of Good Practice 1

Contents

1. Introduction 2

2. Principles of the Code 4

3. Organisations that welcome the Code of Good Practice 7

4. Background 8

4.1. What is a pension scam? 8

4.2. Member transfer rights 8

4.3. The Regulatory Framework 8

4.4. Potential consequences for trustees and providers 10

5. Pension Scams Due Diligence Process - Summary 11

6. Pension Scams Due Diligence Process – In Detail 12

6.1. Transfer Packs 12

6.2. Transfer Request – Initial Analysis 12

6.3. Additional Information Requests 15

6.4. Further Due Diligence 15

6.5. During the Due Diligence Process 25

6.6. Determining Pension Scam Risk 25

6.7. Refusing a transfer and reporting 25

6.8. Reporting to the Regulator 26

6.9. Member appeals 26

6.10. Discharge forms and insistent members 26

6.11. Internal “white list” approach 27

6.12. Example letters 27

APPENDIX A – Example Letters 28

APPENDIX B – Recording Decisions 35

APPENDIX C – Example Discharge Form Wording 41

2 Combating Pension Scams: A Code of Good Practice March 2015

1. Introduction

Pension scams can be damaging to individuals, pension schemes and society generally. People are easily tempted by such offers, but many of those who are taken in find themselves transferring their secure benefits to rather dubious and risky unregulated investment structures, often based overseas. Huge fees are often deducted from the funds and transferees may be subject to tax penalties which they had not understood, leaving transferees with substantially reduced benefits for retirement. In some cases the funds are simply stolen.

Pension scams present a real dilemma for trustees and providers and those that administer schemes on their behalf. The individual often has a statutory right to transfer, but it is the trustees and providers who are required to determine that the receiving scheme is one which they are lawfully able to transfer to and who have a duty to act in the interests of all scheme members, including the ones requesting a transfer to another arrangement. There is no magic bullet, so judgments have to be made, balancing legal rights and risks and trustees and providers struggle with such conflicts on a daily basis. They therefore have called for guidance in making such judgement calls.

To answer the call and to ensure an appropriate response to pension scams, the pensions industry decided to develop a Code of Good Practice, written by a group made up of the key stakeholders, including trustees, administrators, legal advisers and insurers. The Code, which follows, has been reviewed by a wide group of industry bodies and organisations to ensure broad acceptance and encourage widespread adoption of its principles. The reviewing organisations are shown below.

Organisations which welcome the Code are shown at section 3.

STATUS OF THE CODE OF GOOD PRACTICE

• The Code of Good Practice is voluntary

and sets an industry standard for

dealing with requests by members for

transfers from a UK registered pension

scheme to another registered pension

scheme or Qualifying Recognised

Overseas Pension Scheme (QROPS).

• The Code is not a statutory code.

• The Code does not replace or override

existing requirements or guidance

issued by regulatory bodies on

transfers and pension scams.

The Code is aimed at trustees,

administrators and providers and sets out

industry standard due diligence to follow

when considering a transfer request.

The legislation relating to transfers is

not prescriptive as to due diligence that

trustees/providers should carry out on

transfer applications.

This Code is intended to help those

involved in the administration of

registered pension schemes to assess

members’ transfer requests. Trustees and

providers should carry out a reasonable

level of due diligence and not aim to rely

on the HMRC registration process alone.

OBJECTIVES OF THE CODE OF GOOD PRACTICE

The Code covers:

• Standard Information/evidence

required by the transferring scheme

to enable a transfer to proceed with

reasonable assurance that it would not

result in a pension scam.

• Guidance on reasonable steps to

take to minimise delay and provide

reassurance to all parties.

• A set of example letters.

• Standard information provided to

and requested from members and

other parties, including ways to raise

member awareness of pension scams.

• Additional information to consider

when dealing with transfers to a

Self-Invested Personal Pension (SIPP),

Small Self-Administered Scheme

(SSAS) or QROPS.

• The steps for reporting

suspicious cases.

• A guide to help trustees and providers

to identify some “red flags” which may

indicate the need for greater scrutiny.

COMMENCEMENT DATE

The Code takes effect from 16 March 2015

and is available for use in any transfer

request processed on or after that date,

even if the request for a transfer was

received before 16 March 2015.


UPDATES TO THE CODE OF GOOD PRACTICE

The Code will be reviewed and updated

on a regular basis to ensure it reflects

current risks and good practice. The

current version can be found on the

industry website;

www.combatingpensionscams.org.uk

RECENT DEVELOPMENTS

Freedom and Choice in Pensions

From 6 April 2015, greater freedom and

choice will become available to members

of defined contribution pension schemes

and with pension freedom comes the

risk of poor choice and the risk that

scammers will target people with access

to those freedoms. They may deliberately

try to collect information about scheme

members approaching retirement age

and may try to target scheme members

who cannot take advantage of the new

flexibilities to try to scam them out of

their benefits. The due diligence set out in

the Code continues to apply to transfers,

but practitioners should try to be vigilant

where benefits are being paid out in cash.

For further information on the pension

flexibilities from April 2015, see –

https://www.gov.uk/government/

uploads/system/uploads/attachment_

data/file/385065/TIIN_8130_2140.pdf

Pensions Ombudsman Cases

In January 2015, the Pensions

Ombudsman published long awaited

determinations on complaints in

connection with suspected pension

scam cases. The Industry Group

considered the impact of the cases and

strengthened the due diligence and

decision-making process where relevant.

We will keep this under review as further

cases are published.

THE AUTHORS OF THE CODE OF GOOD PRACTICE

I am grateful to the following individuals who formed the Industry Group and who gave

their time to drafting the Code:

Chairman Margaret Snowdon OBE (PASA and JLT Employee Benefits)

Secretariat Alison Kennedy, TISA

Consumers Michelle Cracknell, TPAS

Zachary Gallagher, AMPS

Steve Coe, TISA

Administrators Gary Evans, Mercer

Sara Cook, Barnett Waddingham

Heather Bryson, Towers Watson

Darren Philp, B&CE

Trustees/schemes Brian Spence, Dalriada Trustees

Philip Exact, RSA

Elaine Emptage, RSA

Karen Bennett, AB Foods

James Walsh, NAPF

Providers Tommy Burns, Standard Life

Steve Hyndman, Phoenix Life

Iain Mills, Zurich

Lawyers/Technical Matthew Swynnerton, DLA Piper

Ben Fairhead, Pinsent Masons

John Wilson, JLT Employee Benefits

I am also grateful to the organisations

shown below, who gave time and

expertise to review the Code through its

various iterations. Any errors or omissions

are, of course, the responsibility of the

Code’s authors.

Association of British Insurers (ABI)

Confederation of British Industry (CBI)

Concept Group

JLT Employee Benefits

National Association of Pension

Funds (NAPF)

National Crime Agency (NCA)

Pensions Administration Standards

Association (PASA)

Pensionweb

The Pensions Ombudsman

The Society of Pension

Professionals (SPP)

Xafinity Consulting

Margaret Snowdon OBE, Chairman of

Pension Liberation Industry Group

www.combatingpensionscams.org.uk

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/385065/TIIN_8130_2140.pdf




2. Principles of the Code

There are two key aims that trustees/providers will generally have: firstly to make only a valid transfer, and secondly to help put the member in a position to make an informed choice in relation to a valid transfer where there are suspicious circumstances. A transfer that is not to a registered pension scheme (or a QROPS) is not a valid transfer.

“Pension scams” including “pension liberation”, may involve fraud and theft. A range of scams have been developed that go significantly beyond the original liberation concept of setting up trust-based schemes, to exploit perceived tax and legal loopholes, and, typically, offering members cash payments if they transfer from legitimate pension schemes. Reported scams include ‘cloned’ QROPS, and promising extraordinary rates of return through unusual investment opportunities, typically offered via arrangements such as SIPPs and SSASs. These will not necessarily be unlawful in all cases but members are at risk of losing their pension savings.

Scheme members have a responsibility

to protect themselves from scams,

but they need assistance in this. The

Pensions Regulator (Regulator), the

Financial Conduct Authority (FCA) and

HM Revenue & Customs (HMRC) are clear

that the industry should play its part in

ensuring scheme members are aware of

the consequences of falling victim

to scams.

There are steps that trustees, providers

and administrators can take to help

protect both themselves and their

scheme members. Important measures

include: to warn scheme members about

the risks of pension scams; to have a

robust, but proportionate, process for

assessing transfers; to report suspicions to

the correct authorities quickly, and to be

aware of those strategies that are used to

perpetrate pension scams.

These measures will not protect members

of schemes from making poor investment

choices; their intention is to help prevent

members’ pension pots from being at risk

of a pension scam.

The steps that trustees, administrators and

providers should take to protect scheme

members from pension scams can be

distilled into three core principles:

See below for further information on the

core principles:

PRINCIPLE 1

Trustees, providers and administrators should raise awareness of pension scams for members and beneficiaries of their scheme.

• Scheme members should be made

aware of the risks of pension scams.

Awareness material, in particular the

Regulator’s Guidance (the ‘Scorpion’

materials), should be provided in

transfer packs and statements, as

well as on websites where applicable.

(See section 4.3.1 below for online

locations of awareness material.) That

material should be sent to scheme

members directly, rather than through

their advisers.

• Administration staff should be made

aware of the risk of pension scams.

Staff who deal with scheme members

should be made aware of the Scorpion

materials, to help them to identify

potential pension scams.

• Where relevant, Employers should

be made aware of the risk of

pension scams.

1 Trustees, providers and administrators should raise awareness of pension scams for members and beneficiaries of their scheme.

2 Trustees, providers and administrators should have robust, but proportionate, processes for assessing whether a receiving scheme may be operating as part of a pension scam, and for responding to that risk.

3 Trustees, providers and administrators should generally be aware of the known current strategies of the perpetrators of pension scams in order to inform the due diligence they need to undertake and refer to the warning flags as indicated in the Regulator’s Guidance, FCA alerts and Action Fraud.


PRINCIPLE 2

Trustees, providers and administrators should have robust, but proportionate, processes for assessing whether a receiving scheme may be operating as part of a pension scam, and for responding to that risk.

• In dealing with a transfer request,

trustees, providers and administrators

should conduct proper due diligence

on the receiving scheme. Where they

suspect that the receiving scheme

may be involved in a scam, trustees,

providers and administrators should

carefully consider whether the transfer

should proceed.

• Appropriate due diligence will vary for

different types of pension schemes.

– In carrying out due diligence,

trustees, providers and

administrators should aim to collect

information over the following

areas where applicable:

– Receiving scheme type.

– Date of establishment.

– Legal status of the receiving

scheme and any administrators

or operators.

– Location of the receiving

scheme and any administrators

or operators in relation to the

scheme member.

– Any employment link between

the receiving scheme and the

scheme member.

– Marketing methods; for

example, ask scheme members

to confirm how they became

aware of the scheme to which

they intend to transfer and that

they have not been contacted

by the receiving scheme

through cold calling, unsolicited

text messages or emails.

– Provenance of receiving

scheme. Access information

about legitimate schemes, and

schemes over which there are

concerns by using sources put

in place by the authorities, e.g.,

FCA, HMRC, National Crime

Agency. Other sources of

information will also be helpful

such as Companies House etc.

For additional information, see

section 6 (Due Diligence Process).

– The following factors should be

considered, in an assessment of a

receiving scheme:

– Risk of scam: Does it look as

though there is a material risk

that the individual’s pension

savings will be at risk of a

pension scam if transferred?

– Risk of making an unauthorised

payment: Does it look as though

there is a material risk that the

scheme could be responsible

for making an unauthorised

payment? Note that the

existence of an unauthorised

payment or other adverse tax

consequences does not mean

that a transfer is automatically

invalid or that the proposed

transfer is a pension scam.

– Risk of not complying with

statutory deadline: Consider

the timescales for complying

with the transfer request (and

whether you can request an

extension from the Regulator).

– Review the information collated

during the due diligence and

consider whether there is a material

risk of a pension scam.

– Where there is considered not to be

a material risk of a pension scam,

the transfer should be processed

quickly and efficiently.

– Where there is a material risk of a

scam, whether the member has a

right to transfer should be checked.

This may involve taking advice.

– If the member does have a right to

transfer, it will need to be decided

whether to proceed with the

transfer despite the risk of a scam.

This involves an assessment of the

risks associated with either blocking

or allowing the transfer. Again, this

may involve taking advice.

– If the member does not have a

right to transfer, or if, following

the assessment of the risks, it is

decided that the transfer should

not proceed, the following actions

should be taken:

– Write to the member and inform

them that, on the evidence

available, the transfer will not

be paid. Ensure you include the

reasons why the transfer cannot

be paid. Provide information

about potential consequences

of a pension scam and an

explanation of the most

significant concerns preventing

the transfer.

– Where appropriate, e.g.

where there is an active letter

of authority, write to the

administrator of the receiving

scheme and inform them that,

on the evidence available, the

transfer cannot be processed.

– Where appropriate, report

the scheme and administrator

to Action Fraud via: http://

www.actionfraud.police.uk/

report_fraud.

– Where required, the Regulator

should be notified - see section

6.8 below.

– If the member challenges a

decision to block a transfer,

and provides sufficient

additional information to

satisfy the concerns that have

been raised, then the trustees,

providers or administrators

need to consider whether it is

reasonable to proceed with the

transfer and inform the member

of their decision.

– When dealing with an insistent

customer, or where a decision to

make a transfer is taken despite

concerns about pension scams,


the trustees, providers and

administrators should ensure

that the discharge forms that the

member has signed are suitably

robust to reduce risk (although

note that such discharge forms may

not eliminate risk to trustees and

providers of the member or the

member’s beneficiaries bringing a

subsequent claim altogether - see

section 4.4 below).

– Due diligence is unlikely to be

necessary if the receiving scheme

has been vetted previously and

is recorded on an internal list of

schemes that do not

present a pension scam risk.

(See section 6.11).

– Trustees, providers and

administrators should use their

own judgement, take appropriate

advice if necessary, and record

their decisions.

PRINCIPLE 3

Trustees, providers and administrators should generally be aware of the known current strategies of the perpetrators of pension scams in order to inform the due diligence they need to undertake and refer to the warning flags as indicated in the Regulator’s Guidance, FCA alerts and Action Fraud (see section 6.1 for links to the guidance). These strategies continue to evolve, but examples at the time of publishing include:

• Pension scams may use documents

that look like legitimate scheme

documents. Pension scams will typically

use scheme documents that have been

taken from legitimate schemes.

Although these may look appropriate,

the scheme may have no intention of

following them.

• Pension scams will mimic the normal

transfer process. Scheme members may

have completed and signed the transfer

document; however, they may not have

seen or signed any application form or

other document.

• Those intending to operate pension

scams will typically make first contact

with scheme members via cold calling,

unsolicited text messages or emails.

A strong first signal of this would be a

letter of authority requesting a company

not authorised by FCA to obtain the

required pension information;

e.g. a transfer value, etc.

• Schemes established for pension

scams might mimic or clone legitimate

scheme names. In particular, this is

an issue for QROPS. Make sure that the

scheme name matches the QROPS

list, but also that other details such as

address are correct.

• Perpetrators of pension scams are

likely to apply pressure to force a

transfer through. This may include

encouraging direct member complaints,

or through other channels such as a

local MP, or the perpetrators themselves

making that contact. These should

be dealt with in accordance with the

scheme’s normal process; all complaints

should come from the scheme member

rather than a third party.

• Pension scams sometimes promise

high or guaranteed returns to attract

investors. This has been a particular

strategy of scams using SIPPs or SSASs

and the FCA have issued information

about these particular scams.

• Scheme members may be coached

by those attempting to scam them

to answer basic due diligence

questions posed by trustees,

providers and administrators.

Further information can be found on

websites operated by the Regulator, the

FCA, and Action Fraud.


3. Organisations that welcome the Code of Good Practice

Association of British Insurers

Association of Member-Directed Pension Schemes

Association of Professional Pension Trustees

Department for Work and Pensions

Financial Conduct Authority

HM Revenue & Customs

National Association of Pension Funds

Tax Incentivised Savings Association

The Pensions Administration Standards Association

The Pensions Advisory Service

The Pensions Management Institute

The Pensions Ombudsman Service

The Pensions Regulator

The Society of Pension Professionals


4. Background

4.1. WHAT IS A PENSION SCAM?

A “pension scam” includes attempts

to inappropriately release funds from

HMRC registered pension schemes, often

resulting in a tax charge that is normally

not anticipated by the member.

The “scam” usually occurs through the

member of a genuine pension scheme

being persuaded to transfer his/her

benefits to a new scheme (which might

well be a properly registered scheme).

The business promoting the scam may

charge very high fees and in some

cases fraudulently divert funds. The new

scheme may allow access to pension

savings before normal minimum pension

age (normally age 55, other than on

ill-health or death) or more cash than

would normally be allowed either directly

from the new scheme or indirectly via

a purported investment made by the

scheme (which might be described as a

loan or a rebate or commission payment).

These payments are very likely to be

unauthorised payments and thereby give

rise to tax charges.

There are a number of ways in which

those promoting pension scams mislead

members. For example, the member may

not be warned about the tax charges, the

very high fees being charged or the way

in which the pension funds are being

invested. Often, they claim to be taking

advantage of a “loophole” that, in reality,

does not exist.

4.2. MEMBER TRANSFER RIGHTS

In certain circumstances, members have

rights to transfer their benefits from their

current scheme:

• where the relevant legal requirements

are met, and the member exercises

their right to a transfer, the transferring

scheme has a statutory obligation to

make the transfer, and must do so

within six months of the application

(or guarantee date in the case of a final

salary scheme);

• the transferring scheme rules may also

give the member a right to transfer out

even where a member does not have

a statutory right to a transfer.

Where a member requests a transfer,

the trustees/providers must determine

whether the member has a right to a

transfer. This will involve checking:

• whether there is a right to transfer

under the transferring scheme rules.

The relevant rules will need to be

checked in order to determine, for

example, whether the right to a

transfer is at the discretion of the

trustees/scheme administrator or

is subject to any other conditions,

such as the payment not being an

unauthorised payment (which in turn

will need to be assessed). Where the

right is discretionary, those holding

the discretion will need to consider

whether it is appropriate to agree to

the transfer request and, in doing so,

exercise the discretion reasonably; and

• whether the member has a

statutory right to transfer. This

will involve an assessment of

whether the transfer meets the

necessary legal requirements.

These are complex legal questions

which may involve a detailed analysis of

the transferring and receiving scheme’s

governing documents. This analysis is

outside the scope of the Code of Good

Practice, and is something in relation to

which you should seek independent

legal advice.

4.3. THE REGULATORY FRAMEWORK

4.3.1. The Pensions Regulator

The Regulator is the UK regulator of work-

based pension schemes. It has published

detailed information on pension scams,

most recently in March (see - http://www.

thepensionsregulator.gov.uk/pension-

scams.aspx), and expects trustees and

providers to use the Scorpion leaflet

and booklet to make members aware of

pension scams.

The Regulator must be notified where

a statutory transfer is not made within

the relevant statutory timescales. The

Regulator has powers to take action,

including the power to issue civil

penalties in certain circumstances.

The Regulator welcomes the Code of

Good Practice.

In its Scorpion materials, the Regulator

has stated that it cannot predetermine

any future regulatory action it may take.

However, where the transferring trustees

or administrators can provide evidence

for concerns that member funds may

be at risk, then this would be a factor to

consider when deciding whether to take

action in respect of the non-payment of

a transfer.

The Regulator is not able to waive a

trustee’s legal duty to carry out a transfer

within the statutory deadline where the

legislative requirements or requirements

under the scheme rules are met. The

Regulator expects the majority of transfer

requests will be completed within the

statutory deadline.

If the trustees of a transferring scheme

need more time to implement a transfer,

for example because they need more

time to carry out the due diligence steps

in the Code of Good Practice, and if they

consider that they meet the criteria for

an extension, then they may apply to

the Regulator for an extension to

the normal six-month time period.

Circumstances where an extension

may be granted include:

• the member has not taken all steps

they need to take for the trustees to

carry out the transfer;


• the trustees have not been provided

with such information as they

reasonably require to properly carry

out what the member requires.

The application for the extension must

be made within the six month time

period. It should identify the grounds

for the request for an extension, indicate

the additional time required to effect

the transfer and the reasons why the

transfer cannot be completed on time.

Where trustees suspect a pension scam,

they should consider making such an

application as soon as due diligence

raises concerns and they consider that the

criteria to request an extension are met.

4.3.2. The FCA

The FCA regulates all individual personal

pensions, including Self-Invested Personal

Pensions (SIPPs), and all stakeholder

pensions, as well as all regulated financial

advice. The FCA leads on the regulation

of workplace personal pensions, such

as Group Personal Pensions (GPPs) and

Group SIPPs.

The FCA has the overarching strategic

objective of ensuring that the relevant

markets function well. This is supported

by three operational objectives:

• to secure an appropriate degree of

protection for consumers

• to protect and enhance the integrity of

the UK financial system, and

• to promote effective competition in

the interests of consumers.

The FCA ensures that firms provide

consumers with appropriate products

and services. To do this, the FCA regulates

the conduct of around 70,000 businesses,

including firms and individuals working

in the pensions market, such as insurance

firms, independent financial advisers

(IFAs) and SIPP Operators.

To reduce harm from financial crime, the

FCA ensures that firms:

• take appropriate steps to protect

themselves against fraud

• put in place systems and controls to

mitigate financial crime risk effectively

• can detect and prevent money

laundering, and

• do not use corrupt or

unethical methods.

The FCA can take action against firms

and individuals involved in scams in the

sectors and markets that it regulates. This

can include enforcement action against

firms and individuals, and restricting or

imposing requirements on firms’ business.

The FCA’s enforcement action makes it

clear that there are real and meaningful

consequences for firms or individuals that

don’t play by the rules.

The FCA has produced several warnings

about pension scams, for instance:

• http://www.fca.org.uk/consumers/

scams/early-pension-release-liberation

• http://www.fca.org.uk/consumers/

financial-services-products/

pensions/protect

• http://www.fca.org.uk/your-fca/

documents/protect-your-pension-pot

4.3.3. HMRC

Where a scheme meets certain conditions

it can be registered by HMRC.

Recently, HMRC’s registration process has

been changed to deter pension scams:

• HMRC carries out a risk assessment

process before deciding whether or

not to register a pension scheme;

• HMRC requires that the main purpose

of a registered pension scheme should

be to provide authorised pension

benefits; and

• HMRC has powers to de-register a

scheme where it has reason to believe

it is involved in pension scams or if the

pension scheme administrator is not

fit and proper.

A transferring scheme can also ask HMRC

to provide confirmation of the registration

status of the receiving scheme. HMRC

can provide such confirmation without

seeking consent from the receiving

scheme. For further information, see

section 6.3.1.

Tax legislation sets out a list of payments

which a registered pension scheme

is authorised to make in respect of

members, without incurring a tax charge.

A transfer of a member’s pension benefits

will be an unauthorised payment unless

it is a recognised transfer. In order to be

a recognised transfer various conditions

need to be met, including that the

receiving scheme is a registered pension

scheme (or a QROPS).

It is not just non-recognised transfers that

result in unauthorised payments. Many of

the payments made by schemes involved

in pension scam activity, such as pension

payments before normal pension age, will

be unauthorised.

Where unauthorised payments are made,

this could result in the following tax

charges applying:

(i) an “unauthorised payments charge” of

40% of the value of the payment;

(ii) an “unauthorised member

payment surcharge” of a further 15%

of the payment;

(iii) a “scheme sanction charge” of up to

40% of the unauthorised payment

(subject to partial deduction to

the extent payment is made of the

unauthorised payments charge); and

(iv) in extreme cases, if the scheme loses

its registered status, a deregistration

charge of 40% of the scheme assets.

The charges at (i) and (ii) would be levied

on the member. The charges at (iii) and

(iv) will be borne by the scheme.

4.3.4. The Pensions Ombudsman (Ombudsman)

The Ombudsman has jurisdiction to

decide complaints of injustice due to

maladministration and disputes of fact

or law. Members may complain to the

Ombudsman if trustees/providers have

blocked a transfer that the member

believes should have been made,

or if a transfer is made which a member

believes should not have been.


Where a complaint is upheld, depending

on the facts of the case, the Ombudsman

could make directions requiring a blocked

transfer to be made and/or for the

payment of compensation for financial

loss and/or any distress or inconvenience

caused to the member.

The Ombudsman must determine

matters in accordance with the law and

will therefore assess cases by reference

to whether members have a statutory

right to transfer and/or transfer rights

under the scheme rules. The Ombudsman

published three determinations in

January 2015 in relation to cases where

providers had blocked transfers because

they suspected the receiving scheme was

involved with pension scams.

In all three cases, following a detailed

analysis of the receiving schemes’

governing documents, the Ombudsman

concluded that there was no statutory

right to a transfer (although in one case

the complaint was partly upheld in

relation to the exercise of a discretionary

transfer power under the scheme rules),

but the providers had not carried out

the necessary analysis to establish the

members’ transfer rights.

In his closing observations, the Ombudsman

commented that “providers, trustees,

managers and administrators will want

to keep in mind that strictly they can only

refuse to make a transfer beyond the end of

the statutory period if there is no statutory

right to it. They should satisfy themselves of

the position, on the balance of probabilities

and a correct interpretation of the law,

based on such evidence as they can obtain

from the member or receiving scheme or

other sources - and reaching a decision may

involve drawing inferences from a failure

to provide evidence. Where they find that

there is no right to transfer they should be

expected to be able to justify that to the

person asserting the right.”

In an update published alongside the

determinations the Ombudsman stated

that “if the transferors had had a statutory

right that they were determined to enforce,

even in the face of severe warnings, then,

after the providers had made such enquiries

as thought necessary to establish whether

the right existed, the providers could not

have further resisted payment”.

4.4. POTENTIAL CONSEQUENCES FOR TRUSTEES AND PROVIDERS

The difficulty for those faced with a

suspected pension scam is that, on one

hand, the member may have a statutory

transfer right (or a right to transfer under

the scheme), but on the other the trustee

or provider has regulatory and other

general responsibilities to act with due

care and in the best interests of their

members, who could risk losing their

pension savings through pension scams.

Whether the trustees or providers block

or allow the transfer, there are potentially

negative consequences for trustees/

providers which must be weighed up.

If trustees/providers block a valid transfer

request, the potential consequences

include the following.

• The Regulator may take action

where there was a statutory right to

transfer, including imposing a financial

penalty of up to £1,000 in the case

of an individual and up to £10,000 in

any other case on anyone who has

failed to take all such steps as are

reasonable to ensure the transfer was

made (although, note the Regulator’s

comments at section 4.3.1 above).

• The member could complain to the

Ombudsman that they had a right to

transfer and the trustees/providers

should not have blocked it. Costs may

be incurred defending the complaint

which, if upheld, could result in

a direction to pay compensation

covering any actual financial loss to

the member of the transfer not having

been made and/or a payment for

any distress or inconvenience caused

to the member. As noted at section

4.3.4 above, the Ombudsman’s key

focus in determining a complaint is

likely to be on whether the member

has a right to transfer and, based on

the Ombudsman determinations

published to date, where such a right

exists it is likely that the complaint

would be upheld.

• Having to recalculate and pay the

transfer value.

• There may be reputational issues for

the trustees/providers if it is perceived

that they have blocked a legitimate

transfer request.

If trustees/providers make a transfer to

a scheme that it transpires is a pension

scam vehicle, the potential consequences

include the following:

• They may have made an unauthorised

payment, resulting in tax penalties

for the member and the transferring

scheme (see section 4.3.3 above).

• The member could complain to

the Ombudsman that the trustees/

providers should not have made the

transfer. Again, costs may be incurred

defending the complaint which, if

upheld, could result in a direction

to pay compensation covering any

financial loss to the member of the

transfer having been made and/or a

payment for distress or inconvenience.

• The trustees/providers may not benefit

from the statutory discharge from

any obligation to provide benefits to

which the transfer relates. This means

that, despite the trustees/providers

having transferred out the member’s

benefits, the member (and any

contingent beneficiaries) could still

claim benefits from the scheme.

• Even if the member has signed a

bespoke, non-statutory discharge,

this may not bind contingent

beneficiaries, meaning the scheme

could face claims by contingent

beneficiaries for benefits.

• There may be reputational issues for

the trustees/providers if it is perceived

that they have not adequately

safeguarded member benefits.


5. Pension Scams Due Diligence Process - Summary

A detailed description of the Pension

Scams Due Diligence Process is set

out in Chapter 6. By way of overview,

the Process consists of:

• Transfer Packs (section 6.1)

• Transfer Request - Initial

Analysis (section 6.2)

• Additional Information

Requests (section 6.3)

• Further Due Diligence (section 6.4)

• During the Due Diligence

Process (section 6.5)

• Determining Pension Scam

Risk (section 6.6)

• Refusing a transfer and

reporting (section 6.7)

• Reporting to the Regulator

(section 6.8)

• Member appeals (section 6.9)

• Discharge forms and insistent

members (section 6.10)

• Internal “white list” approach

(section 6.11)

• Example letters (section 6.12)

The flow charts below summarise the

Pension Scams Due Diligence Process.

End

Transfer pack/quotation requested by member/

policyholder

Regulator’s awareness material included with

response

Transfer request

Proceed with transferPension liberation risk

identified at Initial Analysis (Section 6.2)?

Make an information request to HMRC

(Section 6.3)

HMRC response also highlights concerns?

(Section 6.3)

Carry out detailed due diligence (Section 6.4)

Assessment: Do you still have concerns?

(Section 6.6)

Assessment: Does member have a right to transfer?

(Section 6.6)

Refuse to transfer and report scheme/

adminstrator (Section 6.7)

Yes

Yes

Risk Indicated

Yes

No

No

No

No No

Yes

Yes

TRANSFER QUOTATION

TRANSFER REQUEST

Determine whether to proceed with transfer

(Section 6.6)


6. Pension Scams Due Diligence Process – In Detail

6.1. TRANSFER PACKS

Every pension transfer pack needs to

include pension scam awareness

material. If a transfer pack is not being

sent to a member directly, pension

scam awareness material should still be

sent to the member’s home address.

This should include a copy of the

Regulator’s latest pension scam

awareness material. The Regulator’s

current awareness material can be

found here:

http://www.thepensionsregulator.

gov.uk/professionals/pension-scams-

professionals.aspx

Where an individual responds to say

that they think they may the victim of

an attempted pension scam, go to

section 6.7.

6.2. TRANSFER REQUEST – INITIAL ANALYSIS

The purpose of this stage of the process is to decide whether detailed due diligence is

required. This guidance is in addition to your normal transfer processes.

We would expect that during the course of the normal transfer processes you would

collect the following information as a minimum:

• member requesting transfer: name and address; and

• receiving scheme: name, address, HMRC registration number, payment details

and type of scheme.

Once you have those details you can begin the initial analysis:

End

Transfer pack/quotation requested by member/

policyholder

Regulator’s awareness material included with

response

TRANSFER QUOTATION

TRANSFER REQUEST

Take action as set out in 6.3

Proceed with transfer

Assess whether member has a right to transfer

See 6.6

Is this a transfer from an accepted “club” or group (e.g.

Public Sector Transfer Club)

Has your organisation currently identified the

administrator/scheme as not presenting a risk for pensions scams activity (Transferring organisations may hold lists

of these)?

Has your organisation currently identified this scheme/administrator

or address as suspicious (Transferring organisations

may hold lists of these)?

Are there any reasons for concern from the “Member Questions” in 6.2.2 below?

No risk

Risk

Yes

Yes

No

No

No

Transfer request

Yes

Yes

No


6.2.1 Initial Analysis – First Questions

When a transfer request is received, each of the following steps should be undertaken initially:

STEP RESPONSE

(i) Is this a recognised ‘club’ or group transfer (e.g. Public Sector

Transfer Club, known group or recipient)?

If yes, “No Risk”, proceed with the transfer.

If no, go to (ii)

(ii) Has your organisation currently identified the administrator/

scheme as not presenting a risk of pension scam activity

(Transferring organisations may hold lists of these)?

If yes, “No Risk”, proceed with the transfer.

If no, go to (iii)

(iii) Has your organisation currently identified this scheme/

administrator or address as suspicious (Transferring organisations

may hold lists of these)?

If yes, ‘Risk’, consider whether transfer should be refused, see 6.7.

If no, go to (iv)

(iv) Do the responses to the 'Member Questions' in 6.2.2 indicate

a risk of Pension Scam?

If no, then proceed with the transfer.

If yes, then take action as set out in 6.3.

The answers to the above questions are designed to determine if the transferring scheme can proceed with the transfer without

undertaking further due diligence (i.e. it can be fast tracked to payment or refusal).

Section 6.3 provides further guidance on how you may undertake the initial steps to identify whether schemes and administrators

present a risk of pension scams.

6.2.2 Initial Analysis – Member Questions

Some information will be required to undertake the initial analysis set out above. It will be for providers or trustees to decide how

they obtain this information but it is suggested that the members should be asked to provide the information below to facilitate

the transfer. It is preferable to obtain information in writing to support your due diligence. You will need to retain an audit trail of the

information requested and the decision you have made.

Ask the following questions;

STEP RESPONSE

Of the individual requesting transfer:

• Will you be receiving any cash payment, bonus, commission

or loan from the receiving scheme or its administrators, as a

result of transferring your benefits?

• Did the receiving scheme/adviser or sales agents/

representatives for the receiving scheme make the first

contact (e.g. a cold call)?

• Have you been told that you can access any part of your

pension fund under the receiving scheme before age 55,

other than on the grounds of ill-health?

• Have you been told that you will be able to draw a higher

tax free cash sum as a result of transferring?

• Have you been promised a specific/guaranteed rate

of return?

• Have you been informed of an overseas

investment opportunity?

If the answer to any of these questions is ‘yes’, you should

consider further action (see 6.3).


Additional questions will depend on the receiving scheme type:

STEP RESPONSE

For an OPS:

• Who is the administrator of the receiving scheme? The

administrator will be the company who is responsible for

providing you with information about your pension savings -

for example an annual statement.

If the Trustee/Provider/Administrator and Scheme is not known

to you and you consider that it does pose a risk, then take action

as set out in 6.3 and 6.4.

If the Trustee/Provider/Administrator and Scheme is known to

you and does not pose a risk, proceed to 6.6.

For a Contract-Based Scheme (CBS) (e.g. personal pension):

• Does the scheme provider show a registration number from

the FCA on their letterhead? Please provide the number.

• Who has advised you to go ahead with the transfer? Please

provide their FCA registration number.

To check whether the CBS is FCA authorised, see 6.2.3.

If the Provider is not FCA authorised, or if the Provider is FCA

authorised and there is a risk of a pension scam, take action as set

out in 6.3 and 6.4.

If the adviser is not FCA authorised, do not provide the adviser

with any information and inform the member (see sample letter

in Appendix A (iv)).

For a SIPP:

• Does the scheme operator show a registration number from

the FCA on their letterhead? Please provide the number.

• Who has advised you to proceed with the transfer? Is

this person authorised by the FCA, to advise on pension

transfers? Please provide their FCA registration number.

To check whether the SIPP is FCA authorised, see 6.2.3.

If the Provider is not FCA authorised, or if the Provider is FCA

authorised and there is a risk of a pension scam, take action as set

out in 6.3 and 6.4.

If the adviser is not FCA authorised, do not provide the adviser

with any information and inform the member (see sample letter

in Appendix A (iv)).

For a SSAS:

• Who is the administrator of the SSAS?

If the Provider/Administrator and Scheme is not known to you

and potentially poses a risk, then take action as set out in 6.3

and 6.4.

If the Provider/Administrator and Scheme is known to you and

does not pose a risk, proceed to 6.6.

For a Qualifying Recognised Overseas Pension Scheme (QROPS):

• Who is the administrator of the QROPS?

Have you been able to obtain the information required above? If ‘no’, then you may not have received sufficient information to

process a valid transfer – go to 6.7.

If the member refuses to answer questions, it is reasonable to take this into account when making a decision on whether the transfer is

likely to be lawful and valid.

6.2.3. Identifying CBS and SIPP and FCA register

CBS providers and SIPP operators are

regulated by the FCA.

As part of that regulatory supervision

the approved persons undergo “fit and

proper” tests, which give the FCA a wide

range of information and oversight, in

excess of any information you would

obtain via due diligence. However, if

you receive a request to transfer to a

scheme provided, or operated, by an FCA

authorised firm the FCA would still expect

you to carry out further due diligence if

your initial due diligence (above) alerted

you to the risk of a pension scam.

You can check whether the provider or

operator is authorised by searching the

FCA Register:

http://www.fsa.gov.uk/register/home.do

Also, a provider of a CBS or SIPP must not

only be FCA authorised but also hold

permission to “establish/operate/wind up

a personal pension scheme”.

Overseas firms passporting into the UK

cannot provide a SIPP. They must be

directly authorised with this permission

as it is not passportable. Some purported

SIPP overseas providers claim that they

are passporting into the UK and are

covered by the EEA passport on the FCA

register. This is not correct.

Report individuals who appear to be

undertaking regulated advice but are not

authorised to do so:

http://www.fca.org.uk/consumers/

protect-yourself/report-an-

unauthorised-firm

If you believe that the transfer would not

be valid, or would be unlawful, report to

Action Fraud - http://www.actionfraud.

police.uk/report_fraud - (see section 6.7).


6.3. ADDITIONAL INFORMATION REQUESTS

It is important that trustees and providers do not go straight to requesting information from HMRC or NFIB instead of first carrying out their own due diligence as set out above. Decisions on transfers based solely on HMRC responses or the NFIB alerts may not be robust enough at this stage and will tie up limited resources.

6.3.1. HMRC requests

If, after completing the initial analysis, you

are unable to rule out the risk of a pension

scam you should query the status of the

receiving scheme with HMRC and include

all the relevant details.

To do this you must either attach your

enquiry to an email and send it to

[email protected] or

write to:

HM Revenue & Customs

Pension Schemes Services

FitzRoy House

Castle Meadow Road

Nottingham

NG2 1BD

It may be several months after your initial

request before you get any response from

HMRC. You should therefore bear this in

mind when considering the timing of

your request to HMRC.

Currently HMRC provides one of the

following responses to the enquiry:

Response 1

HMRC confirms that at this time, both of the

following apply:

• the receiving scheme is registered

with HMRC and is not subject to a

deregistration notice; and

• the information held by HMRC does not

indicate a significant risk of the scheme

being set up or being used to facilitate

pension scams.

Response 2

HMRC only provide confirmation of

registration status when both of the

following apply:

• the receiving scheme is registered

with HMRC and is not subject to a

deregistration notice; and

• the information held by HMRC does not

indicate a significant risk of the scheme

being established or being used to

facilitate pension scams.

At this time one or both of these

conditions does not apply. HMRC is

therefore unable to provide the

confirmation you have requested.

If response 1 is received from HMRC

you should move to section 6.4 and

undertake further due diligence.

If response 2 is received from HMRC, you

should collate with other information

gathered during the initial analysis stage

and proceed to section 6.6 to determine

whether the transfer should or should not

be paid.

HMRC’s response will be based on

information available at the time and

is intended to help the scheme decide

whether to make a transfer. It should not

be the only check that the scheme carries

out and relies on. The scheme should

make further checks to satisfy themselves

before making a transfer.

Any confirmation provided is not to be

taken as a recommendation of a scheme

or product by HMRC.

6.3.2. Law Enforcement Intelligence

Project Bloom is the multi-agency

approach for dealing with pension scams.

It includes representation from the

National Crime Agency, City of London

Police, the Regulator, the FCA and HMRC

amongst others. The Project has worked

on raising awareness of pension scams

with the pensions industry and the

general public, and has referred certain

scams for investigation.

Project Bloom arranged for reports of

pension scams to be made to Action

Fraud (the details for reporting are

included section 6.7), and these reports

are analysed by the National Fraud

Intelligence Bureau (NFIB). On occasion

NFIB uses the reports to produce alerts for

the industry that can be used as part of

the due diligence process.

6.4. FURTHER DUE DILIGENCE

The level of due diligence that should

be conducted is partially dependent on

the type of receiving scheme that the

transfer is being made into, therefore

this guidance has been divided into the

following sections:

• 6.4.1 Occupational Pension

Schemes (OPS)

• 6.4.2 Self-Invested Personal

Pension (SIPP) and Contract-

Based Schemes (CBS)

• 6.4.3 Small Self-Administered

Schemes (SSAS)

• 6.4.4 Qualifying Recognised Overseas

Pension Schemes (QROPS)

At this stage, further due diligence should

be undertaken in respect of a wide

range of issues, including regulatory,

geographical link and receiving scheme

provenance. You should keep a record of

your decisions in relation to each area of

due diligence. An example decision sheet

has been provided to help you with this

(see Appendix B).

Depending on the systems and processes

of your organisation, you may find certain

information easier to collect and interpret.

Therefore, it is up to you how you collect

the information; example questions are

included in each section.

It may not be appropriate to ask all

questions, in all cases.


6.4.1. Occupational Pension Schemes (OPS)

When conducting due diligence on an OPS for the first time, there are a number of key types of information to consider.

Sections (a) to (e) set out what types of information should be collected and the purpose of collecting that information.

Each section sets out example questions that you can use to find the type of information that will be useful to you when making a

decision about whether a scheme or administrator poses a pension scam risk. You can choose which questions to use and you can ask

alternative questions that will achieve the same purpose. This is to help you fit the due diligence process into your existing processes.

Next to each question is an example of the evidence that you can collect to support your decision. Although there is flexibility in the

evidence you require, it is essential that evidence is collected and retained.

When you have gathered your due diligence go to section 6.6 to determine if you should proceed with the transfer.

(a) Pension scam risk

(i) Purpose

Pension funds under an OPS should not be accessible (without attracting tax penalties) until normal minimum pension age has been

reached (save in cases in cases of ill-health or death; or where the member has a protected pension age).

(ii) Example questions

QUESTION VALIDATION

Will you be receiving any cash payment, bonus, commission or

loan from the receiving scheme or its administrators, as a result

of transferring your benefits?

Request to the member in writing or by telephone.

Have you been told that you can access any part of your pension

fund under the receiving scheme before age 55, other than on

grounds of ill-health?


(b) Regulatory

(i) Purpose

There is no requirement for an OPS or its administrator to be FCA registered but trustees of all OPSs must be registered with the

Information Commissioner for Data Protection purposes.

Insurance companies that provide occupational schemes must be FCA registered. There is a substantial due diligence process

involved, and clear rulebook to follow. Appropriate FCA registration should give substantial comfort that the scheme has not been

established for suspicious purposes.

(ii) Example questions and validation

QUESTION VALIDATION

Is this an insured pension scheme? If yes, is Provider

FCA regulated?

Check the FCA Register http://www.fsa.gov.uk/register/home.do

Are the trustees of the receiving scheme registered with

the Information Commissioner’s Office as Data Controllers

(if the trustees are exempt from the requirement to register

as Data Controllers, please provide an explanation of why

they are exempt)?

Letterheaded paper; request other evidence of registration.

(c) Employment link

(i) Purpose

All OPSs should normally have a clear link between scheme employer and member. Is the information about the employer consistent

with the occupation details from the member/policyholder? A lack of identifiable link may be a risk indicator.



QUESTION VALIDATION

Is there an employment link?

Is there evidence of employment by a participating employer? Request payslip from the member/policyholder.

If you are not employed by an employer that participates in the

receiving scheme, please can you provide a brief explanation of

your reasons for wishing to transfer your benefits?

Membership of an OPS might be extended to non-employees,

but these would normally be connected with existing members.

OPSs are not usually marketed to third parties.

What is the date of incorporation of the principal employer for

the receiving scheme?

Letterheaded paper or internet research to evidence that the

employer was already in existence before the member asked to

transfer.

What is the Company registration number for the principal

employer of the receiving scheme?

Letterheaded paper or internet research to evidence that the

employer is real.

What is the business, service or trade provided by the principal

employer for the receiving scheme?

Letterheaded paper or internet research.

Is the principal employer an active or dormant company? Internet research or Companies House WebCHeck – Pension

scams often involves a dormant company to suggest an

employment link.

(d) Geographical link

(i) Purpose

In an OPS, the employer and the member would normally operate from a similar location. Larger companies may operate from a

number of locations; however, your research should indicate when this is the case.


QUESTION VALIDATION

If you are employed by an employer that sponsors the receiving

scheme, please provide the address of your usual place of work

for the employer.

Letterheaded paper, internet research or member question for

other evidence.

Is the employer/provider/administrator address near to the

member’s home address?


other evidence.

(e) Marketing methods

(i) Purpose

OPSs are not generally marketed to a potential member. Cold calling or other unsolicited approaches may be risk indicators.


QUESTION VALIDATION

How did you become aware of the provider/ adviser/receiving

scheme? Did the receiving scheme/provider/adviser make the

first contact? What was the method of communication?


Have you received any advice in connection with transferring

your pension benefits? If so, please provide details of the

organisation or company that provided you with that advice.


During the transfer process, has the receiving scheme (or its

administrators) contacted you with official documentation or has

all communication been by text, email and/or telephone?


Has a courier been sent to your home to collect signed

documentation?



What do you want to achieve through the transfer that you can’t

in your current scheme?


Have you received any promotional material or information

about the receiving scheme? If so, please provide copies.


Have you been pressured by anyone to make a quick decision

about transferring your pension?


What have you been told about the investments of the scheme? Request to the member in writing or by telephone.

(f ) Provenance of receiving scheme

(i) Purpose

An OPS intended for pension scam purposes might have been established recently (e.g. within the last six months). It may even have

been established after the transfer request was made. The sponsoring employer or the administrator may also have been established

recently. They may also be operating from ‘virtual’ offices, or using PO Boxes for correspondence purposes.


QUESTION VALIDATION

Date on which the receiving scheme was registered with HMRC. Copy of Registration certificate and print-off from HMRC Scheme

Administrator website.

Request copies of the receiving scheme’s governing

documentation and formal scheme documents e.g. trust deed

and rules, member booklet, scheme accounts.

If these documents are not forthcoming, this may indicate a risk

of a pension scam.

If these documents are supplied, check them for any obvious

inconsistencies e.g. in relation to the identity of the sponsoring

employer and the member eligibility provisions.

Is the transfer being requested in advance of the scheme being

registered / established?

Compare date of transfer request with date of

scheme establishment.

Name and address of the scheme administrator for the receiving

scheme and (if appropriate) company registration number.

If the Scheme Administrator for the receiving scheme is a

company, print-off from Companies House WebCHeck.

Name, address, account number and sort code for the bank

account of the trustees of the receiving scheme.

Confirmation of trustees’ and scheme’s bank account details.

Is the receiving scheme/administrator run from a ‘virtual’ office? Internet research.

Is the receiving scheme/administrator quoting only a

PO Box address?

Internet research.

If the transfer payment is not to be paid direct to the trustees’

account, please provide an explanation of why the payment is

being made to a different account.

For an OPS this is poor practice (and your internal controls

may not allow this) and might be suspicious - seek a

written explanation.

Has the scheme or administrator been connected to investments

linked to high fraud risk?

Internet research

Example fraud-risk investments include:

• Carbon credit schemes

• Land banking schemes

• New ecological opportunities

• Green oil from trees

• Precious earth metal schemes

• Boiler room share investment schemes

• Overseas property developments

• Storage pods

Are there links with other administrators/schemes /providers for

which you already have suspicions of pension scam activity?

Companies House WebCHeck and review director and

address information against other transfers you already have

noted as suspicious.


Does the administrator have current accreditation from an

independent body (for example PASA)?

Documentation confirming accreditation and period valid for. A

check with the independent body may be appropriate.

Have a number of schemes been established recently from

sponsoring employers with the same address?

Internet research – this might suggest suspicious activity.

Is the director(s) of the sponsoring employer or trustee

company also a director of other companies incorporated

at the same time?

Companies House WebCHeck – this might suggest

suspicious activity.

Have a number of schemes been established by administrators

with the same address?

Internet research – this might be suspicious activity.

Have a number of schemes been established recently from the

same address?

Companies House WebCHeck and review director and address

information – this might be suspicious.

Is the scheme connected to an unregulated investment

company or is it covered by Financial Services

Compensation Scheme?

Check FCA register.

6.4.2. Self-Invested Personal Pensions (SIPP)/other Contract-Based Schemes (CBS)

When conducting due diligence for the first time, there are a number of key areas in which information is required. Sections (a) to (d)

set out what types of information that should be collected and the purpose of collecting that information.

If the due diligence you have conducted satisfies the purpose of each area you should proceed with the transfer and keep a record

of your decision.

If section (a) indicates pension scam activity you should consider further action (see section 6.3) without collecting any

additional information.

If the due diligence has not satisfied the purpose of sections (b) to (d)

(a) Pension scam risk

(i) Purpose

Pension funds under a CBSs should not be accessible (without attracting tax penalties) until normal minimum pension age has been

reached (save in cases of ill-health or death; or where the member has a protected pension age).


QUESTION VALIDATION

Will you be receiving any cash payment, bonus, commission or

loan from the receiving scheme or its administrators, as a result

of transferring your benefits?


Have you been told that you can access any part of your pension

fund under the receiving scheme before age 55 (other than

on grounds of ill-health) or that you will be able to access your

pension fund more tax efficiently?


(b) FCA Regulation

(i) Purpose

SIPP operators must be FCA registered. There is a substantial due diligence process involved, and clear rulebook to follow. Appropriate

registration should give substantial comfort that the scheme has not been set up for suspicious purposes.



QUESTION VALIDATION

Is the SIPP operator FCA regulated? FCA Register.

Does the provider have the appropriate FCA permissions? FCA Register.

Are the trustees of the receiving scheme registered with

the Information Commissioner’s Office as Data Controllers

(if the trustees are exempt from the requirement to register

as Data Controllers, please provide an explanation of why

they are exempt)?

Letter-headed paper; request other evidence of registration.

Is the transfer into the SIPP advised by the same company or

individuals who are administering the SIPP?


(c) Marketing methods

(i) Purpose

Although SIPPs are actively marketed it would be very unusual for schemes to contact prospective members through unsolicited calls.


QUESTION VALIDATION

How did you become aware of the adviser/receiving scheme?

Did sales agents for the underlying investment or the receiving

scheme/adviser make the first contact?














about the ‘receiving scheme’? If so, please provide copies.





(d) Provenance of receiving scheme

(i) Purpose

SIPPs set up for pension scam purposes might have been set up recently (i.e. within the last six months.) They may even have not been

set up before the transfer request is made. The Administrator may also have been set up recently. They may also be operating from

‘virtual’ offices, or using PO Boxes for correspondence purposes.


QUESTION VALIDATION



Request copies of the receiving scheme's governing



If these documents are not forthcoming, this may indicate a

risk of pension scam. If these documents are supplied, check

them for any obvious inconsistencies e.g. in the identity of the

sponsoring employer and the eligibility provisions.



registered / set up?




scheme and (if appropriate) company registration number.

If the scheme administrator for the receiving scheme is a





Is the receiving scheme / administrator run from a ‘virtual’ office? Internet research.

Is the receiving scheme / administrator quoting only a

PO Box address?

Internet research.

If the transfer payment is not to be paid direct to the trustees’

account, please provide an explanation of why the payment is

being made to a different account.

Seek a written explanation.

Has the scheme or administrator been linked to investments


Internet research

Example fraud risk investments include:


• Landbanking schemes






• Storage pods

Are there links with other administrators / schemes / providers

for which you already have suspicions of pension scam activity?


information – this might be suspicious.

Have a number of schemes been set up recently from


• Internet research – this might be suspicious.

Is the director of the sponsoring employer also a director of

other companies set up at the same time?

Companies House WebCHeck – this might be suspicious.

Have a number of schemes been set up by administrators with

the same address?

Internet research – this might be suspicious

Have a number of schemes been set up recently from the

same address?


information this might be suspicious.

Is the scheme connected to unregulated investment company? Companies House WebCHeck.

6.4.3. Small Self-Administered Scheme (SSAS)

A SSAS is an OPS of a type which, until 5 April 2006, was recognised by HMRC as being subject to the provisions of Chapter 20 of

IR12 (2001), “Occupational Pension Schemes Practice Notes”. Though there is no longer a formal definition of SSAS in legislation or

elsewhere, the term continues to be used in regard to an OPS with fewer than twelve members, where all the members are trustees

and take responsibility for determining how monies held by the scheme should be invested.

When conducting due diligence on a SSAS for the first time, there are a number of key types of information to consider.

Sections (a) to (d) set out what types of information should be collected and the purpose of collecting that information.

Each section sets out example questions that you can use to find the type of information that will be useful to you when making a

decision about whether a scheme or administrator poses a pension scam risk. You can choose which questions to use and you can ask

alternative questions that will achieve the same purpose. This is to help you fit the due diligence process into your existing processes.

Next to each question is an example of the evidence that you can collect to support your decision. Although there is flexibility in the

evidence you require, it is essential that evidence is collected and retained.


SSASs do not need an FCA regulated person to be involved. However, many genuine SSAS providers will be a member of an industry

group such as the Association of Member Directed Pension Scheme (AMPS) and association with such trade bodies can be taken

into account.

When you have gathered your due diligence go to section 6.6 to determine if you should proceed with the transfer.

(a) Employment link

(i) Purpose

As SSAS are a type of OPS, there should normally be some employment link, with at least one member. A lack of identifiable link may

indicate that a SSAS vehicle is being used for another purpose.


QUESTION VALIDATION


Is there evidence of employment? Request payslip.

If you are not employed by an employer that sponsors the

receiving scheme, please can you provide a brief explanation of

your reasons for wishing to transfer your benefits?

Membership of a SSAS might be extended to non-employees,

but these would be normally be connected with existing

members. SSASs are not usually marketed to third parties.

(b) Geographical link

(i) Purpose

As above, an employer from a different location may be a sign that the SSAS vehicle is not being used for the purpose of an OPS.


QUESTION VALIDATION

If you are employed by an employer that sponsors the receiving

scheme, please provide the address of your usual place of work

for the employer?


other evidence.

Provider/Administrator address near to the member’s

home address?


other evidence.

(c) Marketing methods

(i) Purpose

SSASs are not generally marketed to potential members, therefore cold calling or other unsolicited approaches may indicate that the

SSAS vehicle is not being used for the purpose of an OPS.


QUESTION VALIDATION

How did you become aware of the adviser/receiving scheme?

Did sales agents for the underlying investment or the receiving

scheme/adviser make the first contact? What was the method

of communication?















about the ‘receiving scheme’? If so, please provide copies.





(d) Provenance of receiving scheme

(i) Purpose

A SSAS intended for pension scam purposes might have been established very recently (e.g. within the last six months.) It may even

have been established after the transfer request was made. The sponsoring employer or the Administrator may also have been

established recently. They may also be operating from ‘virtual’ offices, or using PO Boxes for correspondence purposes.


QUESTION VALIDATION



Request copies of the receiving scheme's governing



If these documents are not forthcoming, this may indicate a risk

of a pension scam.

If these documents are supplied, check them for any obvious

inconsistencies e.g. in relation to the identity of the sponsoring

employer and the member eligibility provisions.


registered/established?




scheme and (if appropriate) company registration number

If the scheme administrator for the receiving scheme is a





Is the receiving scheme/administrator run from a ‘virtual’ office? Internet research.

Is the receiving scheme/administrator quoting only a

PO Box address?

Internet research.

Has the scheme or administrator been linked to investments


Internet research.

Example fraud-risk investments include:


• Land banking schemes






• Storage pods

Are there links with other administrators/schemes/providers for

which you already have suspicions of pension scam activity?

Companies House WebCHeck and review director and

address information against other transfers you have already

noted as suspicious.


Have a number of schemes been established recently from


• Internet research – this might suggest suspicious activity.

Is the director of the sponsoring employer also a director of

other companies established at the same time?

Companies House WebCHeck – this might suggest

suspicious activity.

Have a number of schemes been established by administrators

with the same address?

Internet research – this might suggest suspicious activity.

Have a number of schemes been established recently from the

same address?


information – this might suggest suspicious activity but could

also indicate a large, well established SSAS provider.

Is the scheme connected to an unregulated

investment company?

Companies House WebCHeck.

6.4.4. Qualifying Recognised Overseas Pension Schemes (QROPS)

A QROPS is the only form of overseas pension scheme to which a UK registered pension scheme can pay a “recognised transfer”. If an

overseas pension scheme does not meet the conditions of a QROPS, a transfer to that scheme will not be a recognised transfer, and

will therefore constitute an unauthorised payment from the UK scheme.

For an overseas pension scheme to receive and maintain QROPS status, it must meet certain requirements as detailed in UK legislation

and as monitored and enforced by HMRC. Before making a transfer payment to a QROPS, the transferring scheme’s managers must be

satisfied that the receiving scheme has QROPS status. It should be noted that although HMRC maintains a list of QROPS, managers of

individual QROPS can opt not to have their scheme included on that list.

HMRC’s list of QROPS can be viewed via the link below. It is recommended that, irrespective of the level of due diligence carried

out prior to the making of a transfer payment to a QROPS, the status of the receiving scheme should be checked on the date of the

proposed payment to that scheme, and that a record of that check is made.

It is essential to verify that the transfer is being paid to the scheme included on the list, and not to another scheme using a virtually

identical name (e.g. a clone scheme.). The check should include making sure that the payment is going to the correct country for the

registered QROPS. Payment to a clone scheme is likely to be deemed an unauthorised payment by HMRC.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/403878/qrops.pdf

Unlike, for example, “SIPP” or “SSAS”, the term “QROPS” does not signify whether the scheme is of the occupational or personal type.

The status of a particular QROPS should be ascertained during the due diligence stage, in any request for payment of a transfer from

a UK scheme to a QROPS.

Rather than complicate this Code by offering separate sets of due diligence questions for both occupational QROPS and those

comparable to personal pension schemes, it is suggested that, broadly, those due diligence questions detailed in section 6.4.3 in

relation to SSASs should be considered, in regard to QROPS. The key items to consider are the rationale for moving funds offshore, and

the likelihood that the receiving scheme is a bona fide pension scheme, as if HMRC determine retrospectively that it is not, there may

be a scheme sanction charge liability regardless of whether the receiving scheme was included on the list or not.

Before paying a transfer to a QROPS, receiving scheme managers should ensure that the transferring member has lodged with them a

completed form APSS263, as issued by HM Revenue & Customs.


6.5. DURING THE DUE DILIGENCE PROCESS

6.5.1. Withdrawal of transfer application

It is possible that, during the due

diligence process, the member will

withdraw their transfer request. This

could be because the awareness

information you have supplied and the

questions you have asked have led the

member to realise that the transfer is

possibly connected with a pension scam

and it is not in their best financial

interests to proceed.

Where this happens, no further action

is required in respect of the transfer,

although it would be worthwhile

documenting any concerns revealed

by any due diligence undertaken and

retaining any written evidence and

notes or recording of calls in case further

transfer requests to the same scheme are

received from this or another member. A

sample decision sheet has been provided

to help organisations with this process in

Appendix B.

6.5.2. Extensions

In certain circumstances an application

for an extension for processing a

transfer request can be submitted to

the Regulator. See section 4.3.1. Where

an extension is applied for, the trustees

should then notify the member - see

Appendix A (vii).

6.6. DETERMINING PENSION SCAM RISK

Once you have completed the due

diligence process as set out in sections

6.2, 6.3 and 6.4 as appropriate, and if the

member has not withdrawn their

transfer request, you need to decide

how to proceed.

6.6.1. Governance

Trustees/providers need to ensure they

have appropriate governance processes

in place to determine the risk of a pension

scam and whether a transfer should

proceed. This may include discussing

cases with law enforcement (see section

6.7) and HMRC, and taking independent

legal advice where required.

Challenges to the decision may be

received. These may take the form of

schemes writing directly, or members or

customers deciding to make a complaint.

Therefore, it is necessary to ensure there

is sufficient support and governance in

place to deal with such challenges or

complaints. Being able to show that the

principles in the Code of Good Practice

have been followed should assist in any

defence to allegations that the decision

has been made incorrectly.

All concerns, any written evidence and

notes or recording of calls should be

documented. A sample decision sheet

has been provided to help organisations

with this process in Appendix B.

6.6.2. Determination

The individual(s) responsible for making

the determination should collate

and review the information gathered

during the due diligence process. The

decisions needed are set out below and

summarised in the flow diagram at the

end of this section.

If there has been a failure to supply

information or respond to information

requests, then you should consider

what inferences can be drawn from the

particular failures to provide evidence.

If, in light of all the information collated,

you consider that there is no material risk

of a pension scam, you should proceed to

pay the transfer.

If you consider that there is a material

risk of a pension scam, you should

consider whether the member has a right

to transfer, meaning there is a duty to

process the transfer.

A right to transfer could be either a

statutory right, or a right arising under

the transferring scheme rules (which

may be discretionary). Information on

how the existence of a transfer right

should be assessed is set out in section

4.2. If there is a discretionary transfer

power, the information gathered during

the due diligence process may be

considered when deciding whether to

agree to the transfer.

If you consider that the member does

not have a right to transfer, you should

proceed to section 6.7. You should be

prepared to explain to the member why

you believe that they do not have a right

to transfer.

If the member does have a right to

transfer, but you consider that there is

a material risk of a pension scam, you

will need to make a judgement about

whether to proceed with the transfer.

This will involve an assessment of the

risks associated with either blocking

the transfer or allowing it to proceed.

These are summarised in section 4.4.

You may wish to seek independent legal

advice on the potential consequences of

either decision:

• If you then decide that the transfer

should not be made, proceed to

section 6.7. You should be prepared

to explain to the member why the

transfer is not being made.

• If you decide that the transfer should

be made, proceed to pay the transfer.

To mitigate the risk to you, ensure that

a suitably robust discharge is obtained

from the member before the transfer is

paid - see section 6.10.

If, during this process, you find that

you have made a transfer in good faith

that you now deem to be suspicious, it

should also be reported to Action Fraud -

covered in section 6.7.

6.7. REFUSING A TRANSFER AND REPORTING

If you determine under section 6.6

that the transfer should not proceed,

you should:

• Write to the member and inform

them, with reasons, that you are

unable to make the transfer (e.g.

risk of receiving scheme not being

a genuine pension scheme too

high) – see Appendix A (v).


• Where appropriate, e.g. where there

is an active letter of authority, write to

the administrator/adviser and inform

them that you are unable to make the

transfer – see Appendix A (vi).

• Report the scheme and administrator

to Action Fraud via: http://www.

actionfraud.police.uk/report_fraud.

6.8. REPORTING TO THE REGULATOR

Where you have refused a statutory

transfer payment, where all of the

requirements are met and you consider

the request valid, you should notify the

Regulator (see section 4.3.1 above).

You may also have a duty to report

breaches of the law, as set out in the

Regulator’s Code of Practice 1: reporting

breaches of the law - http://www.

thepensionsregulator.gov.uk/codes/

code-reporting-breaches.aspx.

6.9. MEMBER APPEALS

A member may challenge a decision to

refuse a transfer payment. This challenge

may be informal or part of a formal

complaint. You should be prepared to

explain to the member why the transfer

was refused.

As part of the challenge, the member may

provide sufficient additional information

to satisfy the concerns or failure to

provide information that led to the

transfer being refused. If so, you need to

consider whether it is now reasonable to

proceed with the transfer.

If you decide that the transfer should still

not proceed because the concerns have

not been resolved, you must notify the

member that the original decision not to

pay the transfer stands.

If you decide that the transfer should

proceed, then the transfer should be

processed as quickly and efficiently as

possible. You could ask the member

to complete a ‘discharge form’ (see

section 6.10).

6.10. DISCHARGE FORMS AND INSISTENT MEMBERS

When dealing with an insistent member,

or where you decide to make a transfer

despite the existence of concerns that

there is a risk of a pension scam, you

could ask the member to complete a

discharge form. You should ensure that

the discharge form that the member

signs is sufficiently robust to reduce

your risk.

An example discharge form is set out

at Appendix C. You may wish to take

independent legal advice on the content

of any discharge form and should note

that a discharge form signed by the

member may not eliminate risk altogether

and may not be capable of binding the

member’s beneficiaries.

Has member withdrawn application

Is there a material risk of a pension scam?

Does member have a right to transfer?

Notify the member that the transfer will

not be paid and, where appropriate the

administrator of the receiving scheme, Action Fraud and the Regulator

Yes

Yes

No

No

Yes

Yes

NoNo

No further action

Process transfer

Ask member to complete appropriate

discharge forms

Decide wheather to proceed with transfer


6.11. INTERNAL “WHITE LIST” APPROACH

Section 6.2.1 asks “(ii) Has your

organisation currently identified the

administrator/scheme as not presenting a

risk of pension scam activity (Transferring

organisations may hold lists of these)?”

and “(iii) Has your organisation currently

identified this scheme/administrator

or address as suspicious (Transferring

organisations may hold lists of these)?”

This section provides guidance on how

trustees/providers or administrators might

manage schedules of schemes deemed

to present a risk or not present a risk.

Some organisations have experienced

high levels of suspicious transfer requests

and in processing them have built up

a body of knowledge. They have used

this, to determine at an early stage if

they already have enough information to

decide if the transfer application is valid or

if it could be an unauthorised payment.

It is for each organisation to decide if they

wish to build and maintain a process to

manage a list of organisations, scheme or

individuals that do or do not present a risk

of pension scams and ensure that they

have robust and ongoing due diligence

to support it.

Undertaking this work may significantly

reduce the due diligence needed

on individual transfers. Some key

considerations in deciding whether to

build the process are:

• the volume of transfers processed;

• the resource needed to create and

maintain the lists; and

• the organisation’s risk appetite.

In building the process, organisations will

need to consider:

• the basis for adding an organisation,

scheme or individual to a list. This

could be following a decision being

made to pay or refuse a transfer

request, or it could also incorporate

other information from law

enforcement, regulatory alerts etc.;

• the appropriate sign off to add or

remove a scheme or administrator;

• how schemes and administrators will

move between lists (or be removed) as

new information is gathered;

• how information from external

sources, e.g. industry bodies,

will be incorporated;

• how information gathered will be

verified, for example, where an

administrator with multiple offices

is added to a list, how you will

ensure that all valid contact

information is recorded;

• the controls needed to ensure the

list is reviewed before transfers are

processed and when;

• how you will ensure that staff only

have access to the current list – what

restrictions may be needed on printing

or saving; and

• how the controls in place will

be monitored.

6.12. EXAMPLE LETTERS

Example letters for various stages of this

process are attached as Appendix A:

• Supporting Section 6.2:

Letters (i) and (iv)

• Supporting Section 6.3.1: Letters (ii)

• Supporting Section 6.4: Letters (iii)

• Supporting Section 6.7:

Letters (v), and (vi)


APPENDIX A – Example Letters

(I) MEMBER LETTER WORDING (SEE SECTION 6.2.2)

This example letter must be adapted for your specific circumstances. You may wish to take independent legal advice on its content.

The Pension Scam Due Diligence Process, section 6.2.2 refers to information that providers and trustees should ask members to supply as part of their due diligence process. If they decide to write and request further information, the following suggested wording may assist them in doing so:

Dear <NAME>

Pension transfer request - policy number <INSERT NUMBER>

As a <SCHEME ADMINISTRATOR/PENSION PROVIDER> we have a duty to look for early warning signs that a pension is being

transferred as part of a pension scam. This could be a transfer of a pension to an arrangement that allows benefits to be paid out

before age 55 (the earliest age from which pension benefits can normally be accessed), or promises to pay out a tax-free lump sum

greater than HM Revenue & Customs allow after age 55. Some companies are promising savers that they can cash in their pension

benefits early by transferring their pension savings to them. They are enticing people with pension loans or cash incentives. However,

their information can be misleading and this is when it turns into fraud. They are often not telling savers about the huge tax charges

and the costs in terms of fees. Such a transfer could leave you with a tax bill of more than your pension.

We don’t know if this is the case here and so as part of our standard due diligence checking process we need to ask you to answer the

following questions and/or to provide the following information:

Depending on the information you have already received, you may ask the member/policyholder to provide the following:

• Will you be receiving any cash payment, bonus, commission or loan from the receiving scheme administrators as a result of

transferring your benefits?

• How did you hear about the receiving scheme?

• Have you been told that you can access any part of your pension fund under the receiving scheme before age 55, other than on

grounds of ill-health?

• Have you been promised a specific or guaranteed rate of return on your pension fund under the receiving scheme?

Depending on the type of receiving scheme you may consider asking the member/policyholder to provide further information and

evidence. The receiving scheme type to which the question is relevant is in brackets:

• What is the name of the individual or company providing day-to-day administration services for the receiving scheme

(Occupational Pension Scheme/Small Self-Administered Scheme (SSAS))?

• Does the scheme provider show a registration number from the Financial Conduct Authority (FCA) on their letterhead? What is it?

(Contract-based/personal pension scheme/Self-Invested Personal Pension (SIPP))

• Who has advised you to go ahead with the transfer? Please provide evidence of their FCA registration number. (Contract-based/

personal pension scheme / SIPP)

You can get more information about pension scams from the Pensions Regulator’s website:

http://www.thepensionsregulator.gov.uk/pension-scams.aspx

Yours sincerely


(II) LETTER TO HMRC (SEE SECTION 6.3)


Where due diligence checks indicate pension scam activity or information requests from the other areas have not been met then you should confirm the status of the receiving scheme with HMRC. The following example wording may be helpful to you in drafting a suitable letter. You may also want to adapt it to the circumstances of a particular case, by including an explanation as to why there are concerns about the receiving scheme.

Dear <NAME>

Pension transfer request

We have received a request from <INSERT PROVIDER/ADVISER NAME> to transfer pension funds into <INSERT NAME OF RECEIVING

SCHEME>.

We understand that there have been an increased number of requests to transfer pension benefits to schemes that may be involved

or associated with pension scams.

Our research indicates that <INSERT SCHEME ADMINISTRATOR NAME> were the scheme administrators in respect of transfer requests

to alleged pension scams <INSERT OTHER RELATED COMPANY NAMES>. Therefore before we proceed with any request(s) to transfer

pension funds into <INSERT NAME OF RECEIVING SCHEME>, we would request that HMRC provide written confirmation that the

scheme is a registered pension scheme.

Enclosed with this letter are copies of:

• approval from the authorised signatory for <NAME> Administration authorising HMRC to confirm to <INSERT YOUR OWN

COMPANY NAME> that the <INSERT NAME OF RECEIVING SCHEME> is a registered scheme; and

• a copy of the HMRC PSTR confirmation letter that we have been provided with in relation to the receiving scheme.

We will await your response before progressing the member’s request to transfer and would therefore be grateful for a prompt

response. Please do not hesitate to contact me in the meantime if you require further information.

Yours faithfully


(III) MEMBER LETTER WORDING (SEE SECTION 6.4)


The Pension Scam Due Diligence Process, section 6.4 refers to information that providers and trustees should ask members to supply as part of their due diligence process. If they decide to write and request further information, the following suggested wording may assist them in doing so:

Dear <NAME>


We are writing to you further to your letter of <insert date> requesting that we transfer your benefits to <XYZ RETIREMENT BENEFIT

SCHEME>. As a <SCHEME ADMINISTRATOR/PENSION PROVIDER> we have a duty to look for early warning signs that a pension is

being transferred as part of a pension scam. This is the transfer of a pension to an arrangement that could allow benefits to be paid out

before the minimum pension age of 55, or promises to pay out more cash “tax-free” than HM Revenue & Customs allow after age 55.

Some companies are promising savers that they can cash in their pension benefits early by transferring their pension savings to them.

They are enticing people with pension loans or cash incentives. However, their information can be misleading and this is when it turns

into fraud. They are often not telling savers of the huge tax charges and the costs in terms of fees. Such a transfer could leave you with

a tax bill of more than your pension.

We don’t know if this is the case here and so as part of our standard due diligence checking process we need to ask you to answer the

following questions and/or to provide the following information:

Depending on the information you have already received, you may ask the member/policyholder to provide the following:

• Please send a recent payslip as evidence of employment by a participating employer of the receiving scheme (Occupational

Pension Scheme).

• If you are employed by an employer that sponsors the receiving scheme, please provide the name and address of your usual place

of work for the employer.

• If you are not employed by an employer that participates in the receiving scheme, please provide a brief explanation of your

reasons for wishing to transfer your benefits (Occupational Pension Scheme).

• How did you become aware of the Provider/adviser/receiving scheme? Did they make first contact? (OPS)

• Have you received any advice in connection with transferring your pension benefits? If so, please provide details of the organisation

or company that provided you with that advice and a copy of the advice.

• During the transfer process has the receiving scheme (or its administrator) contacted you with official documentation or has all

communication been by text, email and/or telephone?

• What do you want to achieve through the transfer that you can’t in your current scheme?

• Have you been pressured by anyone to make a quick decision about transferring your pension?

• What have you been told about where your funds will be invested by the receiving scheme? Please send copies of any information

or brochures you have been sent.

You can get more information about pension scams from the Pensions Regulator’s website:

http://www.thepensionsregulator.gov.uk/individuals/dangers-of-pension-scams.aspx

Yours sincerely


(IV) UNREGULATED ADVISER MEMBER LETTER (SEE SECTION 6.6)


The Pension Scam Code Due Diligence Process, section 6.2.2 refers to the requirement for persons advising on pension transfers to be authorised by the FCA to give advice regarding pension transfers. Administrators may find the following example wording useful where they need to write to a member advising that they have not provided information to the adviser in these circumstances:

Dear <NAME>


I refer to a recent letter we have received from <XYZ RETIREMENT BENEFIT SCHEME> requesting information regarding your pension

record.

Please note that we have not provided the requested information as the company does not appear to be authorised by the Financial

Conduct Authority (FCA) to give advice regarding pension transfers, which is a requirement for most transfers.

We can provide this information to you if you contact us directly to request this. However, before doing so you may be interested to

read the enclosed leaflet published by a group of Regulatory and Law Enforcement bodies warning of the dangers of pension scams.

You can also get more information about pension scams from the Pensions Regulator’s website:

http://www.thepensionsregulator.gov.uk/individuals/dangers-of-pension-scams.aspx

If you have any questions or would like to discuss any concerns please contact us.

Yours sincerely


(V) TRANSFER DENIED – LETTER TO MEMBER/POLICYHOLDER (SEE SECTION 6.7)


Dear <NAME>


We are contacting you in relation to a pension transfer request that we have received from <PROVIDER NAME> that instructs us to

transfer your fund from your <INSERT BRAND NAME> pension to <INSERT SCHEME NAME>.

We are contacting you in relation to a Pension transfer request that we have received from <PROVIDER NAME> that instructs us to

transfer your fund from your <INSERT BRAND NAME> pension to <INSERT SCHEME NAME>.

We have taken a decision not to transfer the fund to the required scheme due to the possible risk of a pension scam [and because you

do not have a legal right to transfer]. We understand that being able to access your pension pot before the age of 55 may sound very

attractive. However, the contributions you have paid into your pension fund have received tax relief and as a result there are tax rules

about when and how you can take money from your pension pot that must be adhered to.

GIVE SPECIFIC DETAIL AS TO WHY THE DECISION HAS BEEN MADE NOT TO PROCEED WITH THIS TRANSFER

The scheme that you have asked us to transfer your pension fund to has flagged up against a number of the scenarios above. [In

addition, you do not have a legal right to a transfer for the reasons given above]. Having reviewed the information available to us we

have decided not to make the transfer to this scheme as we believe there are reasonable grounds to suspect that the scheme to which

you have chosen to transfer may be involved in pension scams.

We apologise for any inconvenience that this may cause, however we hope that you can appreciate the need for us to be vigilant in

order to protect our customers and ourselves from unnecessary losses.

What should I do next?

Your pension fund will remain safely with us until we hear from you further or you approach your selected retirement age, when

we will contact you again. If you believe that you have a genuine need to transfer your pension to another provider we would

recommend that you seek independent financial advice from an adviser that is regulated by the Financial Conduct Authority. If you

need help in finding a regulated adviser then please visit www.unbiased.co.uk.

If you have any questions, you can call <SCHEME/PROVIDER CUSTOMER HELPLINE ON XXX XXXX XXXX> or write to us if preferred.

Our contact details and opening hours are shown at the top of this letter, together with the policy number and our reference details,

which we will need you to provide when contacting us.

Yours sincerely


(VI) TRANSFER DENIED – LETTER TO RECEIVING SCHEME (SEE SECTION 6.7)


Dear <NAME>

Pension transfer request for policyholder <NAME> - policy number <INSERT NUMBER>

Pension transfer request for member <NAME> - scheme name <INSERT NUMBER>

I refer to your request of <DATE> to transfer the above pension to the <PROVIDER NAME> scheme.

We have reviewed the information available to us, and we have concluded that we are unable to process the transfer due to the

possible risk of a pension scam [and because the member does not have a legal right to transfer].

GIVE SPECIFIC DETAIL AS TO WHY THE DECISION HAS BEEN MADE NOT TO PROCEED WITH THIS TRANSFER

We are therefore unable to process this transfer, and we will be writing to the <POLICYHOLDER/MEMBER> to inform them of

our decision.

If you need to contact us please do so using the above telephone number.

Yours sincerely


(VIII) SUGGESTED WORDING TO MEMBER WHERE THE TRUSTEE/PROVIDER HAVE APPLIED TO THE REGULATOR FOR AN EXTENSION TO THE 6 MONTH DEADLINE


If scheme administrators need more time to carry out the necessary due diligence checks, they may apply to TPR within the normal time period for payment of statutory transfers for an extension to that time period. TPR is not able to reply to all such applications within the time period.

Administrators may find the following example wording helpful in updating members:

The Trustees/provider have, within the statutory period, made an application to the Pensions Regulator for an extension in respect

of consideration of payment of a transfer to a registered pension scheme. The Regulator has the power to grant an extension in

accordance with the statutory regulations.

The Trustees/provider now await the Regulator’s response.


APPENDIX B – Recording Decisions

(I) EXAMPLE PENSION SCAM DECISION SHEET – OCCUPATIONAL PENSION SCHEME

Pension Scam Indicators

FACTORS/INDICATORS (INCLUDES QUESTIONS WHICH YOU MAY HAVE ASKED THE MEMBER)

CONCERN (ü)

NO CONCERN (ü)

N/A (ü)

EVIDENCE (EXPLAIN OR ADD LINK)

Pension Scam Risk Initial Indicators

Will you be receiving any cash payment, bonus,

commission or loan from the receiving scheme

or its administrators, as a result of transferring

your benefits?

Have you been told that you can access any part

of your pension fund under the receiving scheme

before age 55, other than on grounds of ill-health?

Have HMRC provided confirmation that the

scheme fully meets the conditions of approval?

A. Regulatory

Are the trustees/provider of the receiving scheme

registered with the Information Commissioner’s

Office as Data Controllers (if the trustees are

exempt from the requirement to register as Data

Controllers, please provide an explanation of why

they are exempt)?

Is this an Insured pension scheme if yes is the

Provider FCA regulated?

B. Employment Link


Is there evidence of employment by a

participating employer?

Scheme Information:

Name:

Type:

Address:

Advisers and Role:

High proportion of risk indicators

High proportion of mitigation indicators

Higher risk that transfer application may not be valid – consider if payment should be made

Lower risk that transfer application may not be valid – consider if grounds not to pay


If you are not employed by an employer that

participates in the receiving scheme, please can

you provide a brief explanation of your reasons for

wishing to transfer your benefits?

What is the date of incorporation of the principal

employer for the receiving scheme?

What is the Company registration number for the

principal employer of the receiving scheme?

What is the business, service or trade provided by

the principal employer for the receiving scheme?

Is the principal employer an active or

dormant company?

C. Geographical Link

If you are employed by an employer that sponsors

the receiving scheme, please provide the address

of your usual place of work for the employer?

Is the Employer/Provider/Administrator address

near to the member’s home address?

D. Marketing Methods

How did you become aware of the Provider/

adviser/receiving scheme? Did the receiving

scheme/Provider/adviser make the first contact?

Have you received any advice in connection with

transferring your pension benefits? If so, please

provide details of the organisation or company

that provided you with that advice

During the transfer process, has the receiving

scheme (or its administrators) contacted you with

official documentation or has all communication

been by text, email and/or telephone?

Has a courier been sent to your home to collect

signed documentation?

What do you want to achieve through the transfer

that you can’t in your current scheme?

Have you received any promotional material or

information about the ‘receiving scheme’? If so,

please provide copies

Have you been pressured by anyone to make a

quick decision about transferring your pension?

What have you been told about the investments

of the scheme?

E. Receiving Scheme Provenance

Date on which the receiving scheme was

registered with HMRC

Request scheme governing documentation and

other formal scheme documents e.g. trust deed


Is the transfer being requested in advance of the

scheme being registered/established?


Name and address of the Scheme Administrator

for the receiving scheme and (if appropriate)

company registration number

Name, address, account number and sort code

for the bank account of the trustees of the

receiving scheme

Is the receiving scheme/administrator run from a

‘virtual’ office?

Is the receiving scheme/administrator quoting

only a PO Box address?

If the transfer payment is not to be paid direct

to the trustees’ account, please provide an

explanation of why the payment is being made to

a different account.

Has the scheme or administrator been linked to

investments linked to high fraud risk?

Are there links with other administrators/

schemes/providers for which you already have

suspicions of pension scam activity?

Does the administrator have current accreditation

from an independent body (for example PASA)

Have a number of schemes been established

recently from sponsoring employers with the

same address?

Is the Director of the sponsoring employer also

a director of other companies established at the

same time?

Have a number of schemes been established by

administrators with the same address?


recently from the same address?


investment company or is it covered by Financial

Services Compensation Scheme?

Summary

<ADMINISTRATOR TO SET OUT RECOMMENDATION BASED ON DUE DILIGENCE CARRIED OUT.>

Decision

<TRUSTEE/SCHEME MANAGER TO RECORD DECISION.>


(II) EXAMPLE PENSION SCAM DECISION SHEET – SSAS

Pension Scam Indicators

FACTORS/INDICATORS (INCLUDES QUESTIONS WHICH YOU MAY HAVE ASKED THE MEMBER)

CONCERN (ü)

NO CONCERN (ü)

N/A (ü)

EVIDENCE (EXPLAIN OR ADD LINK)

Pension Scam Risk Initial Indicators

Will you be receiving any cash payment, bonus,

commission or loan from the receiving scheme

or its administrators, as a result of transferring

your benefits?

Have you been told that you can access any part

of your pension fund under the receiving scheme

before age 55, other than on grounds of ill-health?

Have HMRC provided confirmation that the

scheme fully meets the conditions of registration?

A. Employment Link


Is there evidence of employment by a

participating employer?

If you are not employed by an employer that

participates in the receiving scheme, please can

you provide a brief explanation of your reasons for

wishing to transfer your benefits?

B. Geographical Link

If you are employed by an employer that sponsors

the receiving scheme, please provide the address

of your usual place of work for the employer?

Is the Employer/Provider/Administrator address

near to the member’s home address?

C. Marketing Methods

How did you become aware of the Provider/

adviser/receiving scheme? Did the receiving

scheme/Provider/adviser make the first contact?

Scheme Information:

Name:

Type:

Address:

Advisers and Role:

High proportion of risk indicators

High proportion of mitigation indicators

Higher risk that transfer application may not be valid – consider if payment should be made

Lower risk that transfer application may not be valid – consider if grounds not to pay


Have you received any advice in connection with

transferring your pension benefits? If so, please

provide details of the organisation or company

that provided you with that advice

During the transfer process, has the receiving

scheme (or its administrators) contacted you with

official documentation or has all communication

been by text, email and/or telephone?

Has a courier been sent to your home to collect

signed documentation?

What do you want to achieve through the transfer

that you can’t in your current scheme?

Have you received any promotional material or

information about the ‘receiving scheme’? If so,

please provide copies

Have you been pressured by anyone to make a

quick decision about transferring your pension?

What have you been told about the investments

of the scheme?

D. Receiving Scheme Provenance

Date on which the receiving scheme was

registered with HMRC

Request scheme governing documentation and

other formal scheme documents e.g. trust deed


Is the transfer being requested in advance of the

scheme being registered/established?

Name and address of the Scheme Administrator

for the receiving scheme and (if appropriate)

company registration number

Name, address, account number and sort code

for the bank account of the trustees of the

receiving scheme

Is the receiving scheme/administrator run from a

‘virtual’ office?

Is the receiving scheme/administrator quoting

only a PO Box address?

Has the scheme or administrator been linked to

investments linked to high fraud risk?

Are there links with other administrators/

schemes/providers for which you already have

suspicions of pension scam activity?


recently from sponsoring employers with the

same address?

Is the Director of the sponsoring employer also

a director of other companies established at the

same time?

Have a number of schemes been established by

administrators with the same address?



recently from the same address?


investment company or is it covered by Financial

Services Compensation Scheme?

Summary

<ADMINISTRATOR TO SET OUT RECOMMENDATION BASED ON DUE DILIGENCE CARRIED OUT.>

Decision

<TRUSTEE/SCHEME MANAGER TO RECORD DECISION.>

(III) OTHER SCHEMES

The decision sheets above can be adapted for a CBS, SIPP or a QROPS.


APPENDIX C – Example Discharge Form Wording

This discharge wording must be adapted for your specific circumstances. You may wish to take independent legal advice on the

content of any discharge form and in particular whether to include the square bracketed sections. You should note that a discharge

form signed by the member may not eliminate risk altogether and may not be capable of binding the member’s beneficiaries.

DECLARATION, INDEMNITY AND DISCHARGE

I confirm that I have read and understood <INSERT NAME OF EXISTING ADMINISTRATOR>’s letter dated <DATE> and the additional

information published by the Pensions Regulator about pension scams supplied with it and I confirm that I still wish to proceed with the

transfer to <INSERT SCHEME NAME>. I confirm the following:

• I have been advised by the Trustees of the <XYZ PENSION SCHEME> to seek and obtain independent financial advice from a

financial adviser authorised by the Financial Conduct Authority (FCA). If the transfer value exceeds £30,000, then you must take

advice if the transfer is taking place after 6th April 2015.

• I have / have not* obtained financial advice from:

FCA Registration No

(Insert name of financial adviser, if applicable)

• I understand and acknowledge that the Trustees of the <XYZ PENSION SCHEME> have a statutory obligation to report certain

transfers to HM Revenue & Customs (HMRC) and will carry out that obligation.

• I understand and acknowledge that if I access any of the funds before the age of 55 (except in limited circumstances of

ill-health) this will result in an unauthorised payment under tax legislation and I will be required to declare this to HMRC and will

be personally liable to pay tax and other charges, normally totalling 55% of any such unauthorised payment, and I agree to settle

such charges from my personal assets. If I fail to declare an unauthorised payment to HMRC, I may be charged further penalties.

• I understand that when accessing any of the funds the maximum that can normally be paid tax free is 25%.

• [I hereby indemnify the Trustees of the <XYZ PENSION SCHEME> in respect of any additional tax and/or sanction charges that may

be levied upon them in relation to this transfer.]

• I fully discharge the Trustees of the <XYZ PENSION SCHEME> from their obligation to provide any benefits to me or my

beneficiaries if the transfer is paid.

• [I hold the Trustees of the <XYZ PENSION SCHEME> harmless from and against all actions, claims, demands, liabilities, damages,

costs, losses or expenses (including without limitation, consequential losses, loss of profit, loss of reputation and all interest,

penalties, legal and other professional costs and expenses) resulting from my decision to proceed with my transfer request.]

• I confirm that any information provided about me by the receiving scheme/adviser has been verified by me as factual and correct

and that the Trustees of the <XYZ PENSION SCHEME> are in no way responsible for any quotation or any literature issued by the

receiving scheme/adviser.

* delete as applicable

Signed (Member name):

Dated:

In the presence of (Witness name – IN CAPITALS):

Witness address:

Postcode

Witness signature:

Documents

Combating Pension Scams A Code of Good Practice - TISA · 2 Combating Pension Scams: A Code of Good Practice March 2015 1. Introduction Pension scams can be damaging to individuals,